Some would be better off paying for their nursing home themselves instead of using Fair Deal Scheme

[Sarenco]

Hi Brendan

While I don't want to derail this epic thread unnecessarily, I wonder would the two sons in your original example not be better off topping up their mother's income to pay the nursing home fees in order to keep her out of the FD scheme entirely?

As I understand it they would get tax relief on the fees and it would preserve the full value of their expected inheritance.

 

[Brendan Burgess]

So are these the right figures? I have substituted twofor1's estimate of €60k in costs as the more typical cost.

A few points in this example:

• The children should pay the nursing home costs
• They would be financially better off renting out the house - but if they choose not to, that is their choice.

We could go a step further. The mother should pay only around €6,000 of the nursing home fees herself and so use up her 40% tax bracket. The children should pay the rest.

 

[twofor1]

I wonder would the two sons in your original example not be better off topping up their mother's income to pay the nursing home fees in order to keep her out of the FD scheme entirely?

I cannot see any reason why this lady with a €700K house and annual income of €40K would not be in Fair Deal, she has nothing to lose, and potentially a lot to gain. Nursing home fees are deductible whether you are in under Fair Deal or not.

Certainly for the first 3 years this lady’s assessed contribution would be way more than her nursing home costs. But she should still be in Fair Deal as if she lives beyond 3 years the valuable house will be disregarded from her financial assessment.

If she is not in Fair Deal she will continue to pay in full. One of my relations recently passed away after been in under Fair Deal for 7.5 years.

If in under Fair Deal and this lady opts for the Nursing Home Loan, that element will be recouped after she passes. The amount she pays weekly based on her income will be tax deductible.

If in under Fair Deal and this lady opts not to avail of the Nursing Home Loan, the amount she pays weekly based on her valuable home and on her income will be tax deductible. She will also be leaving her house in its entirety with no charge against it.

 

[twofor1]

Well, she will have to contribute 80% of her net annual income (~€25k) and her estate will potentially lose up to 22.5% of the value of her house.

I'm not sure I understand this - will her estate not lose up to 22.5% of the value of her home (€157,500 at today's value)?

Alternatively, the mother and her sons could foot the nursing home bill without going into the scheme at a net cost of ~€35k per annum.

Happy to be corrected on any of the above.

In this lady’s case she is going to pay for her care in full for the first 3 years anyway.

After that if she is in Fair Deal the house will be disregarded and unless she has a lot of savings, her contribution should drop substantially.

If she is not in Fair Deal, she will continue to pay in full indefinitely.

If this lady does not have the funds to pay the part assessed on her home, then she can avail of the Nursing Home Loan, which would be repayable after her passing. Bear in mind no one will pay more than the cost of their care.

Anything they pay whether in the scheme or not is tax deductible.

She has nothing to lose by being in Fair Deal, but should she live beyond 3 years she has a lot to gain, as the house will then be disregarded.

 

[Brendan Burgess]

No one pays more than the cost of their care.

Hi twofor1

While that is true, is it not the case that the children get tax relief if they pay it from their income, but they don't get any tax relief if it's reclaimed from the estate?

Is the following correct for the cost to the family for someone who stays 3 years in a nursing home.

 

[twofor1]

This is the best way I can explain it;

If the lady in this case goes into a nursing home privately, she will pay €60K annually for each year she is in care (not just the first 3), she or her family, if they pay it, can get tax relief on this €60K.

If the lady in this case goes into the same nursing home under Fair Deal and doesn’t avail of the Nursing Home Loan, she will also pay €60K annually and she or her family, if they pay it, can get tax relief on this €60K, but after year 3 assuming her savings are not above 36K, the house will be disregarded and she will only pay €32K annually and get tax relief on this €32K.

There is nothing to lose, and if you live more than 3 years a lot to gain.

 

[Brendan Burgess]

Are you saying the following

1) She pays €32,000 out of her own pocket
2) She is deemed to pay the other €28,000 although the HSE actually pays it.
3) She gets tax-relief on the full €60,000

But the tax-relief is completely wasted as she has no taxable income.
Gross income: €40,000
less nursing home costs: €32,000
Taxable income: €8,000
So she pays no tax.

If her children pay it, they will be able to utilise the full tax relief.

Brendan

 

[Slim]

Are you saying the following

1) She pays €32,000 out of her own pocket
2) She is deemed to pay the other €28,000 although the HSE actually pays it.no she pays the full 60k.
3) She gets tax-relief on the full €60,000


Brendan

 

[twofor1]

No Brendan, I’m saying, looking at your table,

If the children pay the €60K without their mother being in Fair Deal, they can claim tax relief on this 60K.

If the children pay the €60K with their mother being in Fair Deal, they can claim tax relief on this €60K.

Tax relief is available on either Private or Fair Deal, I don’t think your table takes this into account.

The advantage of Fair Deal though is the house is disregarded after 3 years, whereas if one is not in Fair Deal one is paying full price indefinitely.

 

[Brendan Burgess]

OK twofor1

She registers for the Fair Deal, but the HSE doesn't pay anything or lend any money.

If so, then the correct thing for people to do is
1) Register for the Fair Deal immediately
2) The children should pay most of the nursing home fees.

Brendan

 

[twofor1]

OK twofor1

She registers for the Fair Deal, but the HSE doesn't pay anything or lend any money.

If so, then the correct thing for people to do is
1) Register for the Fair Deal immediately
2) The children should pay most of the nursing home fees.

Brendan

Yes, and if accepted, she will then be in under Fair Deal.

The amount assessed will be more than the cost of her care, so she or her family will pay in full for 3 years.

Towards the end of year 3, she applies to be reassessed disregarding the house.

 

[Brendan Burgess]

How on Earth can the kids get tax relief and the Fair Deal monies?!

I think what twofor1 is saying is

1) You go into the Fair Deal Scheme but you don't actually get any payments.
2) They pay the nursing home fees and get the tax relief.

I find it hard to believe, but maybe, just maybe, it's designed like that.

Brendan

 

[Gordon Gekko]

I think that this point is interesting in the context of Brendan's example and other cases..."if you've been in a nursing home for 3 years and then apply for Fair Deal, the 7.5% on your home doesn't apply."

So for the first 3 years of nursing home care, why not just claim tax relief on the €80k fee, resulting in an annual cost of €48k? Then enter Fair Deal which would make the fee €32k forever (i.e. 80% of the individual's income).

No €156,000 landgrab in respect of the house and the effective fee for the family capped at €32k forever.

 

[Sarenco]

‘’ If you have already been in a nursing home for 3 years when you apply for the scheme, then you do not pay the 7.5% on your principal residence.’’

Can’t see this mentioned on the HSE or Dept of Health sites, but if this is up to date and correct, then there is probably no point in the lady in this case going through Fair Deal. Her sons can pay privately, get the tax relief and apply in 3 years time for Fair Deal.

Assuming the statement is correct, would it not be fair to say that it would be positively unwise to apply for the FD scheme until the lady in this case has been in a nursing home for three years?

 

[twofor1]

Assuming the statement is correct, would it not be fair to say that it would be positively unwise to apply for the FD scheme until the lady in this case has been in a nursing home for three years?

Yes, that is what I have said in my post that you have quoted.

 

[Sarenco]

Yes, that is what I have said in my post that you have quoted.

Well, no, you said there was "probably no point" in going through the FD scheme, which suggests that it probably doesn't matter much either way.

What I'm asking is whether the family in question would actually be better off opting not to avail of the scheme, at least until the mother has already spent three years in a nursing home? Or to put it another way, she would have little to gain and potentially a lot to lose by availing of the scheme - which I believe is the opposite of what you originally said.

Apologies in advance if I have misrepresented your position.

 

[twofor1]

Well, no, you said there was "probably no point" in going through the FD scheme, which suggests that it probably doesn't matter much either way.

What I'm asking is whether the family in question would actually be better off opting not to avail of the scheme, at least until the mother has already spent three years in a nursing home?

Apologies in advance if I have misrepresented your position.

Well yes, I did say probably.

If what Citizens Information says is right it probably doesn’t matter much either way.

On further reflection though, if it was me, I think I would stick with the Fair Deal option, as it is likely the 7.5% contribution on income and assets and the 3 year cap will be increased, if I am in the system now I will avoid these increases.

No need for apologies.

 

[Sarenco]

Thanks for the clarification twofor1.

So you are not saying it would be positively unwise to avail of the scheme.

You are saying that it probably doesn't matter much either way but, on balance, you would opt into the scheme on the basis that it might provide some protections from possible future changes to contribution levels. Right?

So you disagree with Gordon's analysis below - is that correct?

So for the first 3 years of nursing home care, why not just claim tax relief on the €80k fee, resulting in an annual cost of €48k? Then enter Fair Deal which would make the fee €32k forever (i.e. 80% of the individual's income).

No €156,000 landgrab in respect of the house and the effective fee for the family capped at €32k forever.

Sorry to sound nitpicky but I think it's an important distinction in the context of this discussion.

 

[twofor1]

So you are not saying it would be positively unwise to avail of the scheme.

You are saying that it probably doesn't matter much either way but, on balance, you would opt into the scheme on the basis that it might provide some protections from possible future changes to contribution levels. Right?

So you disagree with Gordon's analysis below - is that correct ?

I would not use a phrase like ‘’Positively Wise or Unwise’’ on AAM, the reason being this is a discussion forum where people share their view’s and knowledge, often opinions change after hearing what others have to say.

I think at the moment anyway, I would probably stick with the Fair Deal option.

I agree with Gordons analysis. But I can’t see anything in it that would make it more advantageous to be in privately rather than Fair Deal.

If I am missing something, or if you know some reason why it would be more advantageous to go private first, why not just tell us.

 

[Brendan Burgess]

I cannot see any reason why this lady with a €700K house and annual income of €40K would not be in Fair Deal, she has nothing to lose, and potentially a lot to gain. Nursing home fees are deductible whether you are in under Fair Deal or not.

Hi twofor1

This was your first contribution on the issue. It seems to me to be plain wrong.

The sons can get tax relief on the money that they pay for her care.

She gets much less tax relief.

She can claim the full amount paid by her, but lent by the HSE.

The sons cannot claim tax relief on the amounts paid by her and lent by the HSE.

The purpose of this thread was to make it easy for people to understand the best approach to the Fair Deal scheme.

We all get stuff wrong and, if you have got it wrong, it would be very helpful if you acknowledge that you have got it wrong. I will go back and edit the thread to make it readable for others.

Brendan